Kusserow’s Corner: Extendicare Health DOJ Settlement of $38 Million and Five-Year Quality of Care CIA with the OIG

The Department of Justice (DOJ) announced the largest “failure of care” settlement with a chain-wide skilled nursing facility (SNF) in the Department’s history. Extendicare Health Services, Inc. (Extendicare) and its subsidiary ProStep entered into a settlement with the DOJ and agreed to pay $38 million to resolve allegations that they billed Medicare and Medicaid for materially substandard nursing services that were so deficient that they were effectively worthless, and billed Medicare for medically unreasonable and unnecessary rehabilitation therapy services in 33 of its skilled nursing homes in eight states (Indiana, Kentucky, Michigan, Minnesota, Ohio, Pennsylvania, Washington, and Wisconsin). Overall, the chain provides services at 146 facilities in 11 states.

Two Relators brought separate cases against Extendicare; they will receive more than $2 million as their share of the recovery. [See United States ex rel. Lovvorn v. EHSI, et. al. C.A. 10-1580 (E.D. Pa) and United States ex rel. Gallick et al., v. EHSI et al., C.A. 2:13cv-092 (S.D. Ohio)].

Extendicare also will enter into a five-year chain-wide Quality of Care Corporate Integrity Agreement with the HHS Office of Inspector General (OIG) under which they must have a comprehensive compliance program with systems to address the quality of resident care. The compliance program must include, among other things, corporate-level committees to address compliance and quality, including a committee to assess staffing, and an internal audit program to assess the quality of care provided to residents. Extendicare must retain an independent monitor, selected by the OIG, who will regularly visit Extendicare’s facilities and report to the OIG, along with an Independent Review Organization (IRO) that will perform annual reviews of claims to Medicare.

This case is particularly significant in the fact that the fraud charges resolved by the settlement were for billing for sub-standard care. It helps set precedents for taking actions against other providers who provide services that did not measure up to quality of care standards. The DOJ allegations focused on the fact that Medicare and Medicaid were billed for materially substandard nursing services. They alleged that the services were so deficient that they were effectively worthless, and that Extendicare billed Medicare for medically unreasonable and unnecessary rehabilitation therapy services, meaning the claims were in fact false and fraudulent.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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